Taft Launches Distressed Company Task Force

To address the evolving needs of its clients, Taft assembled a Task Force of seasoned partners from around the Midwest to assist borrower clients in every way, including in discussions with their lenders and in addressing concerns over suppliers and stakeholders.

While lenders typically have “special asset” managers and in-house counsel that are experienced in dealing with distressed credits, many borrowers, on the other hand, have never triggered a default under their credit agreement and have not experienced the economic turmoil unfolding now.

In discussions with their lenders, management teams should be aware of the following:

  • If your company was not in default under its credit agreement before March 1, 2020, your lender has significant latitude to afford you short term accommodations. The Federal Deposit Insurance Corporation (FDIC) and other regulators have issued guidelines for lenders, describing the regulators’ views on how lenders may administer loans in extraordinary times.
  • In conjunction with any short term financial accommodations, a lender might ask its borrower to execute a forbearance or extension agreement. This is helpful to all parties, as expectations and repercussions can be more clearly defined. Such agreements will include features that may seem unfamiliar to many borrowers, including the following:
    • Blanket release of all actions of the lender prior to the date of the new agreement;
    • Requirements for additional financial reporting, including more prompt submission of unaudited data;
    • A reaffirmation of the validity and enforceability of all the credit agreements, including any applicable guaranties.

For advice on navigating your credit agreement and working with your lender, contact any member of the Distressed Company Task Force.

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